Economics Business Music Politics Altruism : May 2014

CEO as Super Salesman

It’s not uncommon for CEO to spend substantial part of their time with customers but is it really essential and healthy? The answer is a resounding yes but with lots of caution as if wrongly done, it can send the business southbound. Here are some of the guidelines starting with the don’ts first. Not being negative but mistakes can be more costly. We have substituted the term Sales for Account as it better describe the function in current dispensation.

· Business relationships are inherently B2B or B2C and not personal

Business relationships have three dimensions. The formal, personal and proxied.

It is important that to have a mix of the three to cement business relationships. If highly leveraged on the personal, key man issues might arise should CEO depart. Customers might follow CEO or competitors might chance upon such moments of vulnerability to pinch your customer and raid your business.

For companies with substantial brand equity that is tightly associated with the CEO like Steve Jobs at Apple, the new CEO would have a larger pair of shoes to fit into like Tim Cook. Otherwise substantial brand equity will be an upside. If you carry a name card with emblems of names like McKinsey or Goldman Sachs, half the battle is already on your plate.

Whilst personal dimensions ( both directly personal or proxied ) are important in business, the core of business relationships are still formal in nature and ought to be conducted with such end in mind. The personal and proxied should be view as a means to the end and not the end in itself.

· The ‘Buck Stops Here” Syndrome

This is borrowed from a phrase that inhabits the desk of US President Truman in the oval office. If CEO’s involvement is beyond ceremonial to operational, should a major issue arise, it reaches end point prematurely as the CEO who presents the end point is there for the picking. The Buck Stops Here has it use ( and abuse ).

In technology focused business, it is not uncommon to see CEOs behind computers ( not as a tool for their actual job ) performing what is essentially an engineer’s job. Bill Gates spent almost his entire first day back at Microsoft as an adviser in Feb 2014 trying to install Windows 8.1 upgrade on his PC. To add injury, he also had the new CEO Satya Nadella in tow. Perhaps it is cheaper and more cost effective to have the contractors upgrade the windows in his new corner office for a better view. It is so essential to apply the right type and level of resource to problems.

Decision ought to be made at the right level. Illustrations abounds of how senior people making ill advised decisions that ought to be made at levels which are better armed with field situations and relevant operation doctrines.

· Negotiations

This is a very sinful trap CEOs or senior executives fall into repeatedly for reasons like stealing the thunder from the account team. For meetings to negotiate deals which are almost or already in the bag, CEOs ought not to be present. Should customers demand better pricing or more favourable terms and conditions, it can be declined or deferred on the basis that it is outside the sand box of those present. Such reasons go down easier with customer as it sounds as if those present want to help but is constrained. The customer might even be sympathetic about it.

During my career as account director in a product company, I have declined some invitations by business partners to be present at customer meetings for the same reason. Agents can use my absence more effectively than my presence by deferring or declining such request to the principal.

· Product Centred Events

Events that are centred mainly on features, performance and products/services road maps are not meant for customer’s CEOs or senior executives. The occasion should be graced by your CEO or senior executives by way of a keynote address and maybe during the Q&A or break session. The engagement should kept in the macro or social dimensions and the account team should preferably to there to control the engagement.

The CEO can play a very vital and key role in sales and some of the functionaries might include these.

· Man of Last Resort

There will be situations where critical deals at hand are resting on shaky ground. Such lost can impact business substantially in terms of short term survival and future strategic advantage where the CEO might be the only Man of Last Resort in turning situations around. Such situations should be far and few in between and if it recurs often, something is amiss especially if it occurs mainly with particular account manager or departments without an underlying reasons. Examples would include global accounts ( for which I spent a good part of my career in ) that manages relationships with the most important customers. Escalation in such accounts are more prevalent. The more forward looking business will assign an executive sponsor for each of these accounts from his senior management team. This would provide a more intimate business relationship and escalations can be handled more efficiently.

Even in Man of Last Resort situations, the account team ought to brief the CEO on the field situations and having an account plan as a living document is so important and valuable. It seems to be the bane of many account team perhaps because of the perception that it would make them more dispensable. My personal observation says otherwise that it might be a ticket to the next level.

The possible end points of the meeting should be rehearsed as not every meeting involving the CEO might result in closure. This would help the account team and CEO to conduct themselves appropriately having rehearsed the tango on the possible outcomes and strategies ahead of time. Curve balls will always abound and it is precisely this reason why an executive brief for the CEO is necessary to reduce such risks.

· Connecting

Some business relationships are top down and forged at upper levels between the executives and executed thereafter. It would be an account team’s dream if most deals are constructed as such but in reality, most deals are fought tooth and nails at ground zero.

These connections are increasingly more important as silo vendor providing products and services are transforming into supply chain or outsourcing partnerships. Such engagement involves both extensive and intensive partnerships between the businesses. Sometimes to the extend of Siamese twins cannot happen without senior executive sponsorships. A good example is the relationship between Apple and Foxconn where Foxconn is treated as Apple’s production department but wearing Foxconn emblem.

It should be the account team function to cement the relationship between the businesses in generating engagements between the senior executives of both businesses. Questions prevail on how high the connection should be. The appropriate level would most probably be plus one or two levels above the working relationship. If the product/service is photocopying/printing solution, it will not be wise and appropriate to involve their CEO. The support/approving levels and the height of the organization structure are also key inputs on the appropriate level to engage to.

Account team must manoeuvre with care not to offend customer. Customer must be reassured that it is not to bypass them which can be disastrous. For this reason, it is best done with care and proper advisement. This is certainly not for the rookie or faint hearted.

Having addressed the dos and don’ts, the attention will shift to how to address situations that are already in trouble or are headed towards trouble.

For M&As or the likelihood of such, the CEO and key staff might be given a retention bonus to make it worth their while to stay around to aid the transition. For the purpose of succession planning, the retiring CEO or key staff can be offered an outcome based bonus on retirement.

For business owners cum CEOs that plan to monetised their business by selling, it might seems to fool hardy to make himself less indispensable as it might translate into a lower retention bonus for himself. On the other hand, a business with less key man issues might attract a higher valuation so a balance is needed here.

Insurance company has also ‘develop this market’ with products such as key-man insurance that pays on occurrence of measurable and documentable events pertaining to key-man. Such policies do not fully repair the damage but money does make difficult situations more bearable and can be used to fund resources to repair the damage.

CEO time is not only very costly and precious, it is also not easily expendable and many business as well as CEO might actually not realise. Methods such as having Co-CEOs have at best produced mixed results and not widely adopted. In some cases, 1+1 might amount to less than 2 but at times can dip below 1 due to conflicting directions from two heads.

Account team must manage the CEO engagement with customers prudently and CEOs have to go down hard on the account team with tough love and challenge them on the value proposition before agreeing to the meeting. Last but not least, CEOs ought not be above the law or rules in this case and observe the ground rules themselves.

Peter Lye aka lkypeter

lkypeter@gmail.com

Safe Harbor. Please note that information contained in these pages are of a personal nature and does not necessarily reflect that of any companies, organizations or individuals. In addition, some of these opinions are of a forward looking nature. Lastly the facts and opinions contained in these pages might not have been verified for correctness, so please use with caution. Happy Reading. Peter Lye

StarHub Upgrade Thesis Punctured by Regulators (10th May 2014)

Analyst Sachin Mittal of DBS Vickers Securities authored a similarly titled report on 24 April 2014 which is catchy with a tinge of wicked humor in straight laced Singapore which might impact the public persona of IDA our government regulator.

It seems that IDA has been rightly or wrongly perceived as being “pro business” or rather “pro Telco” judging from the tone of the noise from social media but the landscape seems to be changing. Just before this article went out, IDA has imposed a record fine of S$6 million on another Telco Singtel for an extended outage last year.

The corner stone of this report emanated from a confused public outcry by existing customers of StarHub over an additional S$2.14 fixed monthly charge for the privilege of using the new and faster LTE network. On the surface, it seems reasonable as it is only a fixed monthly charge with no change in the unit rates.

Consumers perceived ( perception can be more deadly than the truth at times) the additional charge as unfair because they have been using it for free all this while. LTE was introduced into Singapore in 2013 with limited geographical coverage and only became available more extensively in recent months.

It is common practice for Telco as well as other industry players to introduce their new products or services for free or reduced rates to attract customers to latch onto the new service. Another key reason stems from a need to test drive their various process to make it road worthy. Some of which might include BSS supporting billing $$$ which is very key as well as OSS for enrolling customers. All these are not a walk in the park and the back office of Telco can have complexity beyond a lay person’s imagination. Lastly, some regulators do not allow Telco to charge until the service is fit for use.

StarHub was up in arms that customers have been briefed at point of sale that this service is free for a limited time period only and Starhub reserves the right to impose additional charges at a future date. In a surprising move, IDA commented that she is satisfied that StarHub has language in the terms and conditions signed by customers and secondly had informed customers well ahead of time on this additional charge. However, there is room for improvement at the point of sale and IDA announced that will work with Telco to improve and tighten these procedures at point of sale.

Another sticky point could be the opt in by default meaning that customers who do not opt out will automatically deemed to have agreed to subscribe to the LTE service at additional change. Starhub might argue that customers have already opted in for LTE when they sign-up. Why would anyone refuse a free service?

This pronouncement is landmark for IDA probably because she might has most probably come to term that if each and every customer were to read the entire terms and conditions thoroughly at point of sale, it would result in an untenable cost of transaction both for the Telco and customers.

Allowing free market forces to govern the market will not do as it is not anywhere near a perfect competition and a label of oligopoly seems more appropriate. As such, joint measures by both IDA and Competition Commission of Singapore (CCS) must be titrated to achieve better balance of power for the lone consumers. Some means of overcoming such situations efficiently and effectively might include making:

certain classes of terms and conditions illegal, void, voidable etc. Such protection should only be extended to retail consumers and not enterprise customers on the basis that an unequally yoked contract is less likely with enterprise customers. The question on whether to extend it to SME is debatable. Such legislatures are already in place in the Sale of Goods Act and what might be needed is a more focused legislature to cover situations unique to Telco.

termination either for convenience or otherwise by either party should have their penalties sand boxed preferably by guidelines from IDA. There have been horror stories from consumers in the past being imposed hefty termination changes that seems legal but hardly equitable. Fixed term contracts are constituted as the language suggest. If Telco makes material changes and/or pricing, it should at least not be applicable to existing fixed term contract consumers. The contracts should tie both parties on an equitable ground till the end of contract. If Telco wants to terminate the contract for convenience, it should pay similar or higher penalty to the consumer at similar rates. Terms and conditions such as Telco reserve the right to vary or change the contract should be the first to be outlawed. Otherwise, why even call it a contract.

variation of pricing during contractual period should be tightly governed by a set of independent, robust, measurable and attributable metrics. To be fair to the Telco, perhaps they should be allowed to vary prices via independent yardsticks like published consumer price index (CPI) or price of electricity. Telco would challenge that the cost of operations have little to do with such yardsticks but it is perhaps the best available yardstick although it sucks just like what examinations are to students

limit the use of automatic opt in by Telcos as this can be abused by carriers leveraging on the fact that most consumers might not have read or understood such notices or Telcos making the opt out process so onerous that consumers dispense with it.

robust and tight tariff filing framework a must to ensure that Telco adhere to fair commercial practices. This is more prevalent in broadband carriers ( lesser extent in mobile operators ) that are perpetually offering discounted prices that are mostly if not always lower than what existing customers are paying. I am not proposing a onerous ‘most favored customer’ like language but an appropriate and transparent tariff filing framework to provide similar cover for existing consumers. Not that tariff filing is a cure all as experience has shown that tariff filing also have loop holes like chaining up prisoners is no guarantee that escape is impossible but makes it less inviting.

IDA has contributed much to Singapore's progress especially in the technology arena. The next leap would most probably need CCS as co-pilot to manage an open market with increasing participation of top global carriers that expects a much more level playing field.

Peter Lye aka lkypeter

lkypeter@gmail.com